Competitor performance offers mixed bag in November

Same store sales in November at Target plunged unexpectedly while apparel discounters and Costco kept humming and Kroger extended its string of consecutive comp increases to nine years.

The nations second largest grocer this week reported a third quarter profit, excluding some non-recurring items, of 46 cents that was three cents better than analysts forecast and its identical store sales increased by 3.2%. Total sales including fuel for the period increased 5.9% to $21.8 billion.

"The economy is slowly improving, but value customers are still struggling," David Dillon, Kroger’s chairman and CEO, said during a conference call. "Overall consumer confidence is up, but it remains fragile."

Kroger said the number of items purchased per trip by its sizable base of loyalty card holders was a key driver of growth and analysts expect the company will maintain its string of quarterly sales increases during 2013.

Meanwhile, Target turned heads this week when it reported a 1% decline in November same store sales that was substantially lower the low single digit increase the company forecast at the start of the month when it reported a 2.4% increase for October that was toward the low end of guidance. The big miss in November showed traffic trends are deteriorating at Target as the company blamed the decline on a decrease in comparable store transactions following a flat performance in October.

The company said sales strengthened later in November and Target chairman, president and CEO sought to reassure investors the unexpected decline wouldn’t affect the profit forecast and said December comps would increase in the low single digit range.

"Profitability for the month remained on plan, reflecting our efforts to balance thoughtful price investments in an intensely competitive environment with our continued focus on driving sales," Steinhafel said. "With the upcoming launch of the Target/Neiman Marcus Holiday Collection, our unique assortment of exclusive, affordable merchandise and the compelling benefits of 5% REDcard Rewards and our Holiday Price Match, we believe Target has the right plans in place to allow our guests to shop with confidence throughout the holiday season."

As in prior months, Target’s strongest growth came in the food category which produced a mid single digit increase and in health and beauty which experienced a low single digit increase. However, hardline sales declined in the mid single digits and the home and apparel categories both decreased in the low single-digit range.

Conversely, apparel discounters TJX Companies and Ross Stores reported results that showed shoppers remain enthusiastic for their brand of value. TJX Companies reported a 3% comp increase on top of a prior year gain of 4% while Ross Stores said posted a comp increase of 2% compared to last November’s 5% comp increase. Total sales at TJX increased 7% to $2.2 billion during the November reporting period and so far this year sales at the company have advanced 10% to $20.3 billion. Total sales for November at Ross increased 6% to $813 million and so far this year are up 11% to nearly $7.8 billion.

"Business throughout the Thanksgiving week and weekend was robust, even as we remained true to our off-price practice of offering great values every day, and stayed out of the fray of Black Friday promotions." said TJX CEO Carol Meyrowitz.

Meyrowitz said increased customer traffic drove the comp increase in November as shoppers were drawn by extreme values on a merchandise assortment she characterized as compelling, always-fresh and branded.

"We continue to be excited about our prospects for December and the fourth quarter. Our marketing campaigns will be seen by more consumers. We have fantastic gift-giving initiatives underway in our store and we’ll be offering amazing values to consumers," Meyrowitz said. "The holiday selling season is off to a very good start, and I am convinced we will continue to bring new customers into our stores and keep them coming back long after December."

Ross Stores vice chairman and CEO Michael Balmuth expressed a similar sentiment.

"November same store sales were slightly ahead of our expectations of flat to up 1%," Balmuth said. "We achieved these results despite unseasonably warm weather in the Western U.S. during the first half of the month. We are encouraged that our sales strengthened as weather normalized during the final two weeks."

Although the company was pleased with its November performance, Balmuth said most of the holiday season was still ahead and forecast December comps in the range of 2% to 3%.

The performance of these chains is noteworthy because they appeal to the same consumer base as Walmart and collectively they have a sizable footprint. Ross ended November with 1.097 stores while its larger rival TJX ended the period with 1,039 T.J. Maxx, 912 Marshalls and 417 HomeGoods stores in the United States.

Meanwhile, Sam’s Club continues to have its handful with Costco. Sam’s larger rival reported a 6% same store sales increase of 6% at U.S. clubs for the four week and 12 week period ended November 25.